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Don't Kiss Hershey Goodbye

Written by: Richard Saintvilus12/10/13 - 6:00 AM EST

Tickers in this article:
HSY KRFT MDLZ NSRGY

NEW YORK (TheStreet) -- As Forrest Gump opined, the unpredictable nature of life is like a box of chocolates; you never know what you're going to get. While that might be true of several companies within the packaged food industry, investors in global chocolate giant Hershey have always gotten strong revenue and dividend growth.

This level of performance has not been lost on the Street. Accordingly, not only has Hershey stock soared as high as 43%, but the company has been rewarded with a decadent P/E of 28, which melts away the industry's average multiple of 7.

In that regard, it's hard for me to develop a "Hershey sweet tooth" here, given my bias as a value investor. Especially when I can tasteNestle at a much cheaper valuation multiple of 20. Not to mention, Nestle slightly outperforms from a margin perspective.

That said, I don't necessarily agree with the recent arguments and talking points that have been raised against Hershey, particularly given the company's international growth expectations. I won't argue against the fact that both Nestle and Mondelez have posted slightly better volumes. That too needs to be considered in the context that they operate from a smaller consumer base.

What's more, despite the rash of mergers and acquisitions activity that has overtaken an industry that is perpetually consolidating, that Hershey still dominates the U.S. in terms of large customers, is encouraging. And contrary to popular opinion, I don't believe the company's 6.1% revenue growth in the recent quarter was fluke.